from the why-we-need-paypal-alternatives dept

See update at the bottom

A few weeks ago, we wrote about Mailpile, a new attempt to create a webmail client that is built with both security and usability in mind -- think Gmail/Outlook-type interface, but which you can control and with built in security. The project looks awesome and is greatly needed these days, as we learn more and more about government intrusions into hosted webmail accounts. Their IndieGoGo campaign has been a huge success, going past their $100,000 target, and is currently at around $137,000, which will allow the three person team to focus on it full time.

Saturday August 31st I woke to two emails from PayPal. The first notified me they had cancelled the debit card associated with my sole proprietor business account, the second was informing me they placed a block on my account barring me from withdrawing or sending any money out of my PayPal account.

Assuming this would get sorted out after a little explaining/security check, the team has been trying to get PayPal to unfreeze the account, with no luck. PayPal is demanding an insane level of detail into Mailpile's personal finances and business:

Afer 4 phone calls, the last of which I spoke to a supervisor, the understanding I have come to is, unless Mailpile provides PayPal with a detailed budgetary breakdown of how we plan to use the donations from our crowd funding campaign they will not release the block on my account for 1 year until we have shipped a 1.0 version of our product. A final email communication from PayPal reaffirmed us of their stance by stating:

"Please provide an itemized budget and your development goal dates for your project"

This puts us in an incredibly uncomfortable position as we do not feel that it's remotely in their jurisdiction to ask for a detailed budget of our business, any more than it is within our right to ask for theirs.

Even worse, it seems that the folks at PayPal recognize that it holds power over Mailpile, and seems almost to be lording that power over them:

Communications with PayPal have implied that they would use any excuse available to them to delay delivering as much of our cash as possible for as long as possible. Asking us to give them justification for such behavior is obviously not in our best interests. PayPal's position particularly ridiculous when contrasted with IndieGoGo's policy of transferring all funds to successful campaigns within 15 days of their conclusion. If IndieGoGo can do it, so can PayPal.

This isn't all of the money raised -- it's about $45,000 of the $137,000, but it's still a huge pain. Mailpile has now had the Software Freedom Law Center look into their legal options for obtaining the money that people donated to the project.

Update: And... of course, the inevitable backtrack. After all the publicity. From PayPal:

We have reached out to MailPile and the limitation has been lifted. Supporting crowd funding campaigns is an exciting new part of our business.We are working closely with industry-leaders like IndieGoGo and adapting our processes and policies to better serve the innovative companies that are relying on PayPal and crowd funding campaigns to grow their businesses. We never want to get in the way of innovation, but as a global payments company we must ensure the payments flowing through our system around the world are in compliance with laws and regulations. We understand that the way in which we are complying to these rules can be frustrating in some cases and we've made significant changes in North America to adapt to the unique needs of crowd funding campaigns. We are currently working to roll these improvements out around the world.